Its main concern is the grey area where donors, particularly to arts organisations, receive something in return for their donation, such as free tickets to shows, a meal at a charity ball or access to special membership areas.

New Zealanders give about $2.7 billion to charity each year; of that, the government pays back about $236 million.

"The more difficult giving is made, the more likely it is to be a disincentive to people. This is what we've heard in the very quick time available from a number of individual patrons and entities that are working in the area, so simplicity is really important."

Arts Foundation executive director Simon Bowden said he thought the IRD's new guidelines would be helpful.

"Arts organisations that have relationships with their donors actually shouldn't need to change anything as a result of this, maybe clear up a couple of little processes up along the way."

He agreed it was important to make a clear distinction between purchases, donations and gifts.

"If I said to you, you can come to my dinner - $50 is the ticket price, $100 is the charitable part, but the only way I can get to the dinner is to make a donation of $100, then that's not a tax-creditable activity.

"But if I say to you, buy a ticket for $50 and we strongly recommend and we would love it if you made a donation of $100, then you can do that."

Charities expert Michael Gousmett said organisations with other charitable or cultural purposes would also be affected.

"It's not just charities we're talking about, it's the wider what the IRD calls donee organisations - in other words, that's organisations that have charitable purposes, but also those that have philanthropic, benevolent or cultural purposes.

"The deep underlying issue here is the IRD's concern, or, more specifically, the government's concern, that the cost of the tax credit ... which is now budgeted at $236m for this financial year, is running out of control."

The bulk of donations across the country actually went to religious organisations, he said.

"Not singling them out ... but the reality is that religious organisations are certainly taking advantage of that, and all credit to them. All they're doing is working within the framework that's been set up."

The underlying rationale for the tax credit system was to increase philanthropy and community self-help, he said.